Capital markets News

Rabobank conducts €2 billion of DLT pilots for commercial paper


Rabobank has completed a series of pilots executing more than €2 billion in commercial paper transactions. These pre-production transactions were executed on the Ubermorgen issuance platform, which leverages blockchain. A third participant is TreasurySpring, which helps to make commercial paper issuances available to investors. Global asset managers were also involved in the trials.

This is the latest demonstration of the advantages of DLT for intraday transactions and settlement efficiency. Typically it takes two days (T2) to settle commercial paper transactions. For short term commercial paper, that’s not ideal.

Ubermorgen supports T0 settlement, and it’s possible to agree on a specific time window for settlement. Other DLT benefits are the efficiency of automation and transparency around the process.

“Ensuring smooth interoperability between Distributed Ledger Technology (DLT) and established financial infrastructures is vital for a seamless shift toward the widespread adoption of DLT platforms in the market,” said Steve Patrick, COO at Ubermorgen.

Ubermorgen integrated its solution with Bloomberg’s TOMS & VCON, City Velocity, EPIM and Swift.

Rabobank’s focus on DLT for money markets

Rabobank has shown an interest in the benefits of distributed ledger for commercial paper for several years. In 2021 it ran pilots with Commerzbank and Euroclear. 

The following year it ran another series of trials with one week maturity commercial paper with Northern Trust and Euroclear. In both cases, it used its own solution leveraging R3’s Corda enterprise blockchain.

“The hybrid approach, global and instant interoperability is the future of finance,” said Jacek Wieclawski, Head of Innovation at Rabobank. “Our clients have shared their enthusiasm about this new solution, which blends the best of both worlds – the speed and flexibility of a distributed ledger technology and the reliability and compliance of a centralised system.”

The European Central Bank is coordinating a series of wholesale DLT settlement trials using central bank money. Commercial paper and intraday transactions are one of the popular use cases. Other major DLT innovations in the intraday treasury sphere include Finteum, which is working on launching intraday FX swaps this year, and HQLAᵡ, which enables intraday collateral movement for banks.

Meanwhile, Orange and Citi launched ID2S, a DLT-based central security depository (CSD) for commercial paper several years ago. The founders shuttered ID2S in 2021 after two years.

Image Copyright: Rabobank